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The S&P 500 slowed its advance today as it hit areas of resistance around $1220. SPX closed up $7 at $1216, but RUT noticeably slowed with a meager $1 advance to close at $714. Trading volume jumped upward with 3.9 billion shares of the S&P 500 trading today, well above the 50 dma. Trading increased 59% on the NYSE and increased 36% on NASDAQ. But much of this volume increase was due to options expiration. The University of Michigan consumer sentiment survey for September was released this morning, 57.8, up slightly from August's 55.7. The department of labor released unemployment data for the states today, showing that unemployment rose in 26 states, fell in 12 states, and remained unchanged in the remaining 12.
RUT settled at $717.19 this morning, so all of the spreads in my Sept iron condors on RUT will expire worthless. That results in a 13% gain for one position and a 19% gain for the other position. It is worth noting that both of these condors originated about a week before the market crashed in August and yet they made nice profits - the power of adjustments!! This brings the year to date gains for the Flying With The Condor™ service to 29% - pretty impressive when compared to a 3% loss for the S&P 500 over the same period of time. Perhaps you should consider auto-trading this service. Returns this high are normally only available to multimillionaire investors in private hedge funds with hefty performance fees. A 29% return for only $149 per month is a great value and isn't likely to stay that low for long.
The Oct iron condor on RUT stands at a P/L of -$3,324 with delta = -$33 and theta = +$47. All eyes are focused next week on the FOMC and any statements regarding additional monetary policies designed to shore up the economy. My guess is that traders will be disappointed. But, in the meantime, focus on your family for the weekend. Worry about Monday's market Monday morning.
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Today turned out to be a positive day in the markets, but this morning illustrated the extreme precariousness of this market. The market opened up positively and traded upward, and then lost about $12 in about 5 minutes or less. As it turned out, the panic was based on a report of a committee vote in Austria dealing with procedural agenda arrangements for the eventual vote of their Parliament on the European bailout package. Within a few minutes, the markets recovered and traded upward steadily until the last 30 minutes of the day, when they sold off. SPX ran as high as $1202 before closing at $1189, up $16 for the day. RUT gained $12 to close at $704. Markets were encouraged by reports that the leaders of Germany and France assured Greece they would have emergency loans available to prevent default until the European Union bailout package became available.
Retail sales came in flat for August as did the PPI. A flat PPI was reassuring since many analysts have been concerned about inflation heating up. But flat retail sales were a concern.
Trading volume in the S&P 500 rose to the 50 dma at 3.6 billion shares; trading on the NYSE dropped 2% while volume rose on NASDAQ by 19%.
Today's trading reinforced two conclusions about this market: 1) It is an extremely volatile market - and those words don't do it justice. It can turn and run you over while you go to get a snack. 2) We are trapped in a trading range of about $1120 to $1220 (you might define the range a bit differently if you use the intraday highs and lows). Be cautious.
My September condors are well positioned to have all of the current remaining spreads expire worthless. All of the spreads are over two standard deviations OTM. My Oct condor stands at a P/L of -$3,000 with delta =-$70 and theta = +$120. The call spreads at 770/780 are under pressure. We'll see what tomorrow brings.
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After trading as low as $1136, the S&P 500 rallied late in the day to close with a gain of $8 at $1162. RUT also closed higher at $680, up $6. The European debt problem remained at the center of traders' worries this morning, and news that China may be considering buying a large portion of Italy's bonds rallied the market toward the end of the day. But a rally of this magnitude was surprising. All of the major indexes closed for gains today after seeing severe losses earlier. The SPX touched $1136 at the low of the day, a little below the low of September 6th, and almost exactly the low of August 26th. Many market analysts have been watching for a bounce off of support before triggering any buying - was this it? I don't know; the market remains very skittish, and we have not actually had the worst headlines yet: Greece defaults, etc. This market's weakness has been largely anticipatory of those headlines. The VIX pulled back to 39% today, but that is still pretty elevated. Some analysts believe we still have lower prices in store before we can rally, e.g., breaking the support on SPX at $1120 before trading upward. Trading volume in the S&P 500 was down from Friday at 3.4 billion, below the 50 dma. Trading on the NYSE was down 9% and trading volume on NASDAQ was down 3%.
My two Sept RUT condors remain open; both spreads in both condors are over two standard deviations OTM, so I have left the spreads open thus far. The Oct condor on RUT stands at a P/L of -$2564 with delta = -$46 and theta = +$139. The elevated volatility is pushing the P/L lower; the call spreads are one standard deviation OTM and the put spreads are over two standard deviations OTM.
I will continue to watch the major support levels on SPX for directional clues; until I see a definitive move higher or lower, I will only be trading delta neutral positions. At times like these, the delta neutral trade presents a very attractive alternative. It is nice to be making money without making any predictions about the market.
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The markets traded upward once again today, but trading volume dropped across the board - not as bullish as it might appear. SPX gained $11 to close at $1173 and RUT closed at $692, up $12. Trading volume in the S&P 500 stocks was down to 3.2 billion, down from yesterday and further below the 50 dma. Trading volume declined 4% on the NYSE and was down 3% on NASDAQ. The SPX chart is trapped in the range of $1120 to $1220. When one analyzes the various issues worrying the market (European debt, US debt and the lack of political courage to deal with the problem, intractable unemployment, etc.), it is hard to imagine any quick fixes. Therefore, range bound trading may be our environment for some time. Directional trading has to be very short term; Jeff Macke refers to this as a "Wolf Market": not bullish, not bearish, requiring the successful trader to trade in and out quickly. Directional trading is never easy, but when the "trend" is a matter of a few days, directional trades are particularly challenging. In this environment, trading delta neutral is very attractive. But the rub here is knowing how to adjust the trade as the market swings rapidly back and forth.
My September iron condors on RUT are cruising into expiration for a nice profit (13% and 17%). All of the spreads are in excess of two standard deviations OTM, so the probabilities of these spreads expiring worthless is very high. The Oct RUT iron condor stands at a P/L of -$2,600 with delta = -$57 and theta = +$128. The short calls have deltas of about 17 so we are close to requiring an adjustment if the market continues upward.
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Obama's jobs plan didn't impress Wall Street, and, if that wasn't bad enough, a resignation in protest at the European Central Bank stoked fears about the European debt crisis. Together, a session dominated by selling was the result. SPX dropped $32 to $1154 and RUT lost $21 to close at $674. Trading volume rose to 3.8 billion shares of the S&P 500, topping the 50 dma at 3.6B. Trading on the NYSE rose by 29% and trading volume on NASDAQ increased 4%. The major indexes closed near their lows for the day and remain firmly lodged in the trading range of the past several weeks.
The spreads of my September condors all passed the two sigma test, so I left them open, but will be watching them closely as we enter expiration week. Both positions are profitable at this point, but the 600/610 put spreads in the one condor are being pressured; they were almost two standard deviations OTM at the close. The Oct condor stands at -$1664 with delta = -$33 and theta = +$97. I removed the call hedges on this position this morning.
Have a nice weekend.
